Global Mergers & Acquisitions Guide 2023

August 30, 2023

“Global Mergers & Acquisitions Guide 2023” featured Sultan Al-Abdulla & Partners’ Senior Associate Omar Qouteshat where he offered his expertise, knowledge, practical insights, and analysis to provide readers with a comprehensive understanding of the regulatory aspects of M&A transactions based on Qatar’s laws and regulations.

Global Mergers & Acquisitions Guide 2023*

A. General

1. What is the main legal framework applicable to companies in your jurisdiction?

The law that governs all types of companies in Qatar is Law No. 11 of 2015 (“Companies Law”).

2. What are the most common types of corporate entities (e.g., joint stock companies, limited liability companies, etc.) used in your jurisdiction? What are the main differences between them (including but not limited to with regard to the shareholders’ liability)?

The most common types of corporate entities are Limited Liability Companies, Holding Companies, Public Shareholding Companies and Private Shareholding Companies.

We describe a brief explanation for each type of these companies.

Limited Liability Companies:

A limited liability company is a company, consisting of 1 to 50 partners. Partners are responsible only to the extent of their shareholding in the capital. Tradable share certificates shall not be issued to partners for their stakes in the company.

Holding Companies:

A holding company is a shareholding, limited liability or sole proprietorship company that financially and managerially controls one or more other companies. The controlled companies, when owned by at least (51%) in shares or stakes by the holding company, shall become subsidiaries of the holding company.

Public Shareholding Company:

A Public Shareholding Company is a company, comprising at least five shareholders, where its capital is divided into transferrable shares of equal value.
The shareholders shall only be liable to the extent of their contributions to the company’s capital.
The founders shall subscribe to shares not less than (20%), and no more than (60%) of the company’s share capital.
The company shall offer shares for public subscription within 60 days of the date of its incorporation.
The company shall be managed by an elected board of directors.
The foreign shareholding will be subject to the oversight of the Qatar Financial Market Authority and the type of activities conducted by the company (for example, foreign investors are prohibited from investing in insurance companies, banks, and commercial agencies).
A non- Qatari investor may own 49% of the share capital of companies that are listed on the Qatar stock exchange, upon the approval of the Ministry of Commerce and Industry; or more than 49% of the share capital of such companies, upon the approval of the Council of Ministers.

Private Shareholding Company:

The private shareholding company is a company, comprising at least five shareholders. Such a company may not offer its shares for public subscription. The minimum capital requirement for the company is QAR 2 million. Such a company shall be managed by an elected board of directors and may be converted into a public shareholding company upon the fulfilment of certain conditions. The liability of the shareholders shall be limited to their respective shareholding in the company’s capital.

B. Foreign Investment

3. Are there any restrictions on foreign investors incorporating or acquiring the shares of a company in your jurisdiction?

Under Law No. 1 of 2019 (“Foreign Investment Law”) it is permitted to establish a 100% foreign entity subject to the approval of the Foreign Investment Department at the Ministry of Commerce and Industry (“MoCI”). For incorporating a foreign investment entity that owns more than 49% of the shares, the applicant will need to complete a special form issued by the MoCI and submit the constitutional documents of the applicant, shareholder’s/ board resolution and a business plan. The same process applies for acquiring more than 49% shares in an established entity in Qatar, except for the submission of the business plan.

4. Are there any foreign exchange restrictions or conditions applicable to companies such as restrictions to foreign currency shareholder loans?

There are no foreign exchange restrictions or conditions.

5. Are there any specific considerations for employment of foreign employees in companies incorporated in your jurisdiction?

All employees are required to enter into an employment contract in Qatar with a local entity and obtain a residency permit. However, the Executive Regulation No. 25 of 2019 of Law No. 21 of 2015 (“Expats Law”) provides several visa categories for each applicant based on the nature of the visit. In our view, volunteers fall under the visa category of the visitor to attend a business meeting or mission (Article 42 of the Executive Regulation). Visas issued for business purposes shall have the following validity periods:

1- Single entry for a period of 30 days, or 60 days, as the case may be.

2- Multiple entry for a period of six months, provided that the maximum permitted length of stay for each entry is of 90 days.

3- Multiple entry for a period of one year, provided that the maximum permitted length of stay for each entry is of 90 days.

It will be at the discretion of the Immigration Department to determine the period of the visa.

C. Corporate Governance

6. What are the standard management structures (e.g., general assembly, board of directors, etc.) in a corporate entity governed in your jurisdiction and the key liability issues relating to these (e.g., liability of the board members and managers)?

The standard management structures include general assembly and director(s) based on the type of the company.
For Limited Liability Companies, it is the general assembly. It may also have a board of managers depending on the Articles of Association.
For Public Shareholding Companies, it is mandatory to have a board of directors.

7. What are the audit requirements in corporate entities?

Each company must appoint an auditor, obtain a tax card and register at the Dhareeba portal.

D. Shareholder Rights

8. What are the privileges that can be granted to shareholders? In particular, is it possible to grant voting privileges to shareholders for the appointment of board members?

In Qatar, shareholders typically have the following privileges:

i. Approval of the manager’s report on the business of the company for that year and its financial position;
ii. Approval report of the company’s auditors;
iii. Approval of the balance sheet and profit and loss account;
iv. The election of auditors for the next year and the fixing of such auditors’ responsibilities and remuneration;
v. Right to vote: Shareholders have the right to vote on important corporate matters, such as the election of directors and approval of corporate transactions.
vi. Right to receive dividends: Shareholders have the right to receive a portion of the company’s profits in the form of dividends.
vii. Right to inspect company books:
viii. Shareholders have the right to inspect the company’s financial records and books.
ix. Right to participate in company meetings: Shareholders have the right to attend and participate in annual shareholder meetings.

However, each shareholder will have the right to vote based on his shareholding in the company.

9. Are there any specific statutory rights available to minority shareholders available in your jurisdiction?

No, there are no specific statutory rights for minority shareholders.

10. Is it possible to impose restrictions on share transfers under the corporate documents (e.g., articles of association or its equivalent in your jurisdiction) of a company incorporated in your jurisdiction?

Yes, articles of association may impose restrictions on share transfers.

11. Are there any specific concerns or other considerations regarding the composition, technical bankruptcy and other insolvency cases in your jurisdiction?

There are no specific concerns.

E. Acquisition

12. Which methods are commonly used to acquire a company, e.g., share transfer, asset transfer, etc.?

The common methods are share transfer and asset transfer.

13. What are the advantages and disadvantages of a share purchase as opposed to other methods?

There are no other methods for share purchase other than the share transfer method stated in our response above.

14. What are the approvals and consents typically required (e.g., corporate, regulatory, sector based and third-party approvals) for private acquisitions in your jurisdiction?

The steps and approvals for share transfer in a limited liability company are as follows:
i. Obtaining tax clearance on the Share Purchase Agreement (“SPA”) from the General Tax Department;
ii. Obtaining approval on the SPA from the Ministry of Labor;
iii. Obtaining approval on the SPA from the Commercial Registration Department;
iv. Authenticating the SPA from the Ministry of Justice;
v. Updating the commercial registration; and
vi. Amending the articles of association to reflect the new shareholders.

15. What are the regulatory competition law requirements applicable to private acquisitions in
your jurisdiction?

The law related to competition is Law No. 19 of 2006 (“Anti-Competition Law”).
The criteria for the notification to the Competition Protection Department requirement is not an objective one, but this will depend on the corporate structure, before and after, and the impact of the sale on the market and the purchaser’s market share.

16. Are there any specific rules applicable for acquisition of public companies in your jurisdiction?

Yes. The Qatar Financial Markets Authority (“QFMA”) rules will apply to the acquisition of public shareholding companies.

17. Is there a requirement to disclose a deal, for instance to regulatory authorities? Is it possible to keep a deal confidential?

For public shareholding companies, it is required to disclose the deal to the QFMA. In accordance with Articles 14 and 15 of the Merger and Acquisition Rules issued by the QFMA (the “Rules”), the concerned parties must comply with the timeline of the merger transaction and if the offeror is unable to comply with the timeline of the transaction, the QFMA must be notified immediately to take the necessary action.

18. Can sellers be restricted from shopping around during a negotiation process? Is it possible to include break fee or other penalty clauses in acquisition documents to procure deal exclusivity?

Yes. These are contractual clauses that can be agreed upon among the parties.

19. What are the conditions precedent in a typical acquisition document? Is it common to have conditions to closing such as no material adverse change?
The parties may agree on the conditions that will govern the acquisition.

20. What are the typical warranties and limitations in acquisition documents? Is it common to obtain warranty insurance?

There is no requirement under the law and this can be agreed upon among the parties.

21. Is there a requirement to set a minimum pricing for shares of a target company in an acquisition?

No. However, the tax authority may not accept the sale consideration. In this case, the tax authority will ask for a third-party evaluation of the fair value of the sold shares. The capital gains tax will be calculated based on the fair value of the sold shares.

22. What types of acquisition financing are available for potential buyers in your jurisdiction? Can a company provide financial assistance to a potential buyer of shares in the target company?

Yes. There are several types of acquisition financing such as debt financing which is the most common form of financing for acquisitions in Qatar, and includes loans from banks, bonds, and other debt instruments.

23. What are the formalities and procedures for share transfers and how is a share transfer perfected?

The parties usually enter into a detailed share transfer agreement that will include all the details and conditions of the share transfer. In addition, the parties will enter a short form of a Share Transfer Agreement which will be submitted to the authorities in Qatar to complete the share transfer. The formalities and procedures are provided in our response to question 14 above.

24. Are there any incentives (such as tax exemptions) available for acquisitions in your jurisdiction?

No. Only acquisitions made between entities fully owned by Qataris are exempted from capital gains tax.

F. Enforceability

25. Can acquisition documents be executed in a foreign language?

Yes. However, the official Share Purchase Agreement that will be submitted to the authorities in Qatar must be in Arabic. The Share Purchase Agreement can be in dual (Arabic and any other language).
Any document to be submitted to the authorities in Qatar must be in Arabic. In case of a dispute before the Qatari courts, all documents need to be translated into Arabic.

26. Can acquisition documents be governed by a foreign law?

Yes. However, the official Share Purchase Agreement that will be submitted to the authorities in Qatar must be governed by Qatari law.

27. Are arbitration clauses legally permissible or generally included in acquisition documents?

Yes. The parties have the right to refer the dispute to arbitration.

28. Are there any specific formalities for the execution of acquisition documents? Is it possible to remotely/digitally sign documents?

The Share Purchase Agreement has to be signed before the Documentation Department at the Ministry of Justice in Qatar. Document required from non-Qatari entities has to be notarized/apostilled and attested by the Ministry of Foreign Affairs and the embassy of Qatar abroad. Any other documents can be signed remotely or by digital signature.

G. Trends and Projections

29. What are the main current trends in M&A in your jurisdiction?

The Qatari government has been focusing on diversifying its economy away from oil and gas, and towards other sectors such as tourism, real estate, and healthcare.
This has increased M&A activity in these sectors. Furthermore, private equity firms have been showing an increased interest in Qatar, with several large deals being announced in recent years.

30. Are any significant developments or changes expected in the near future in relation to M&A in your jurisdiction?

We are not aware of any significant changes in the near future.

*Originally published in Lara Sezerler Irmak Yensel Nergiz Melis Kaim Serra Nur Çelik Begüm Şen (2023), Global Mergers & Acquisitions Guide 2023 (1st ed., pp. 239-244).

Share this news

Join our mailing list

Connect with us

© Copyright 2022 Sultan Al-Abdulla & Partners

error: Content is protected !!